Issue 2

June 2017

Issue 2: June 2017

Duterte's gravy TRAIN for the rich

by Rei Melencio on June 18, 2017

The tax system in the Philippines is biased towards the rich. The Duterte government’s new tax reform package House Bill (HB) 5636 or the Tax Reform Acceleration and Inclusion Act (TRAIN), recently adopted by the Lower House of Congress, further burdens the poor – the unemployed and under-employed -- and low-income earners.

Genuine tax reform means reversing the pro-rich bias in the taxation system. Genuine tax reform must be a mechanism that redistributes wealth, from the rich towards the rest. Income inequality is increasing with the richest families having incomes some nine times more than that of poor families. Genuine tax reform should be a mechanism for reducing the gap in income inequality between the rich and the poor.

The Duterte government’s tax reform does the opposite. According to estimates by some legislators:

It reduces the income of the bottom 60% of the households.

The monthly take-home pay of poor households will shrink by P1,189 and for middle class workers by P13,652.

How come, when according to the bill, workers earning P250,000 a year or approximately P20,000 per month won’t have to pay taxes? Yes, but this is a con.

More of our income will go towards paying Value Added Tax or VAT. The VAT will be expanded and some exempted goods and services will now be charged a VAT. According to some estimates the government will be collecting around Php170 billion less from the richest families while the rest of us will be paying more than Php340 billion for previously VAT-exempt items.

We will pay more for oil and petroleum products as the excise tax on oil and petroleum products will be increased. P3.00-P6.00 excise taxes will be imposed per liter on fuel.

The overall package would result in a net gain of P133.8 billion for the government. This tax revenue will mainly fund the Duterte administration’s trillions-worth of infrastructure spending, which will also be awarding lucrative contracts to the corporate rich.

It’s a win-win for the rich and their corporations, while the rest of us are being conned. We are being conned into paying the lucrative infrastructure contracts being awarded to the corporate rich – both Philippine and foreign owned.

In view of this, PLM calls for genuine tax reform to redistribute the wealth and reduce the income inequality between the rich and the rest. It means the following:

Scrap the VAT;

For a steeply graduated and progressive tax system where the wealthy pay their share;

Introduce a wealth tax for the super rich;

An immediate rise in company tax;

Tax the big environment polluters;

End the billions in public subsidies to the corporations and banks and energy companies;

End rampant tax evasion by the corporate rich;

Double the tax free threshold to P500,000 a year;

Increase the minimum wage;

Increase the social wage through the funding of affordable social services.